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Business impact of outsourcing
New study shows the benefits of IT outsourcing are real
A ground-breaking new study from IBM demonstrates companies engaged in information technology (IT) outsourcing realized improved financial health and performance in comparison to their sector peers.
Drawing from a global database of IT outsourcing agreements across IT services vendors, of which IBM was just one of many, the cross-industry study examined over 56 services engagements over a five-year period. The IBM team utilized a patent pending methodology to measure changes in business performance of diverse companies over a longer-term period-starting from one year prior to outsourcing and up to three years after.
The study's focus was to understand the long-term impact of IT outsourcing on earnings before interest and taxes (EBIT), selling, general & administrative (SG&A) expenses and return on assets (ROA). For all three metrics, the study demonstrated that companies that engaged in IT outsourcing contracts valued at US$50 million or more realized long-term improvements as compared to sector peers.
Double-digit improvements
How much better did the companies in the study who engaged in IT outsourcing perform when compared to their sector peers?
- Higher growth in Earnings: Companies experienced an annual growth in earnings that was 11.8 points higher than the sector median.
- Reductions in expenses: Companies' selling, general and administrative expenses were nearly 9.9 points lower than the sector median.
- Increased ROA: Return on assets annual growth was 8.6 points higher than the sector median-a swing of 16.1 points (prior to outsourcing, the companies' ROA growth rate was 7.5 points lower than the sector median)!
Outsourcing IT: A business strategy that can boost performance
Corporate leaders today are required more than ever to deliver tangible progress and bottom-line performance. As this report shows, executives would do well to examine how IT outsourcing can help them reach, and perhaps even exceed, their goals.
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Download the report "Outsourcing's impact - a fact-based analysis" |  |
Source: IBM Global Services